New Stamp Duty Surcharge for UK Non-Resident Property Investment

15 October 2018

In early October, the current British Prime Minister Theresa May announced new proposals to tackle the housing crisis. Now targeting foreign property investors, the UK government aims to introduce measures imposing further Stamp Duty (or to give it the full name Stamp Duty Land Tax/SDLT) between 1-3%. This will apply to non-UK residents purchasing property in the UK.

Property Was a Big Issue for Conference Season

September is traditionally conference season for the parties. It was at the Conservative Party conference that Mrs May announced a potential new measure to impose further stamp duty on foreign investors. This, she said in her speech, would be used to fund the national homelessness problem. Mrs May went on to say that it was not right that non-residents and foreign-based companies were able to buy property in the UK for investment purposes far more easily than UK-based residents and taxpayers.

This 1-3% extra Stamp Duty will be imposed on top of the existing charge that applies to all second homes.

A Negative Impact on House Prices

A recent government report presented evidence suggesting that non-resident buyers of residential property in the UK was having a negative impact on house prices and artificially inflating prices. Mrs May made no direct link between increased homelessness and foreign ownership. However, the issue of foreign-based ownership coupled with a drop in homeownership numbers in the UK has been a matter of concern for politicians and UK citizens alike. The evidence suggested:

Between 2014 and 2016, 13% of residential property sales in London were purchased by non-UK residents

A 1% increase in foreign ownership (bought by individuals and companies) appears to increase prices by an average of 2.1%

It must be noted that these concerning figures have been alleviated since the research was conducted.

Further Changes to Stamp Duty to Ease the Market

Several significant changes have been made to the Stamp Duty issue in recent years. The rate has increased to 12% on high-end property with a further 3% applying to second homes on the consideration component for properties worth over £1.5m. This applies to properties in England and Wales, but not in Scotland where it is a devolved power.

Analysts suggest that the UK is trying to make Britain less attractive as a place for investment for tax purposes. They point to recent changes to inheritance and capital gains tax for non-residents to alleviate the problem. However, there may be concerns about the illegal discrimination of EU nationals in future.

This is only at the planning stage and a consultation is being prepared; it would have to go through Parliament. The idea is not new. Some states in Australia have successfully introduced such levies on non-resident foreign property investors to prevent another potential housing bubble.